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Beyond the Numbers

Looming Earnings News May Weigh On Wall Street
4/22/2019 8:50 AM

The major U.S. index futures are currently pointing to a lower opening on Monday as trading resumes following the long holiday weekend.

Trepidation ahead of the release of quarterly results from a slew of big-name companies in the coming days may lead to initial weakness on Wall Street.

Coca-Cola (KO), Procter & Gamble (PG), Boeing (BA), Facebook (FB), Microsoft (MSFT), Amazon (AMZN), Intel (INTC), and Exxon Mobil (XOM) are just a few of the companies due to report their quarterly results this week.

Trading activity may be somewhat subdued, however, as many traders remain away from their desks following Easter weekend.

The Easter Monday holiday that kept many overseas markets closed on the day may also keep traders on the sidelines as they wait for earnings season to pick up steam.

Nonetheless, energy stocks may benefit from a spike by the price of crude oil amid news President Donald Trump will no longer grant sanctions waivers to a handful of buyers of Iranian oil.

Extending the lackluster performance seen on Wednesday, stocks continued to show a lack of direction over the course of the trading day on Thursday. The major averages once again spent the day bouncing back and forth across the unchanged line.

At the end of the day, the major averages were all in positive territory, although the Nasdaq inched up just 1.98 points or less than a tenth of a percent to 7,998.06. The Dow climbed 110.00 points or 0.4 percent to a six-month closing high of 26,559.54 and the S&P 500 rose 4.58 points or 0.2 percent to 2,905.03.

For the holiday-shortened week, the Dow advanced by 0.6 percent and the Nasdaq edged up by 0.2 percent, while the S&P 500 dipped by 0.1 percent.

The choppy trading on Wall Street came as traders remained reluctant to make significant moves going into the long Easter weekend.

Traders were also looking ahead to the slew of quarterly earnings news scheduled to be released this week as earnings season continues to pick up steam.

Initial buying interest was generated by upbeat economic data, although buying interest waned shortly after the open amid lingering concerns about the strength of the economy going forward.

Before the start of trading, the Commerce Department released report showing retail sales rebounded by much more than expected in the month of March.

The Commerce Department said retail sales soared by 1.6 percent in March after edging down by 0.2 percent in February. Economists had expected retail sales to climb by 0.9 percent.

Excluding a jump in sales by motor vehicle and parts dealers, retail sales still surged up by 1.2 percent in March following a revised 0.2 percent dip in February.

Ex-auto sales had been expected to increase by 0.7 percent compared to the 0.4 percent drop originally reported for the previous month.

The report said closely watched core retail sales, which exclude autos, gasoline, building materials and food services, also jumped by 1.0 percent in March after falling by 0.3 percent in February.

"Overall, the retail sales figures add to the slightly more positive tone of the recent data and provide some comfort that the economy isn't falling off a cliff," said Andrew Hunter, Senior U.S. Economist at Capital Economics.

He added, "But they don't change our view that the fading of the fiscal boost and the lagged impact of the Fed's monetary tightening will push GDP growth below its 2% potential pace over the coming quarters."

A separate report from the Labor Department showed initial jobless claims unexpectedly edged lower in the week ended April 13th, falling to a nearly 50-year low.

The report said initial jobless claims dipped to 192,000, a decrease of 5,000 from the previous week's revised level of 197,000. Economists had expected jobless claims to rise to 205,000.

With the unexpected decrease, initial jobless claims dropped to their lowest level since hitting 182,000 in September of 1969.

Most of the major sectors ended the day showing only modest moves, although substantial weakness remained visible among tobacco stocks.

Reflecting the weakness in the sector, the NYSE Arca Tobacco Index tumbled by 2.1 percent to a two-month closing low.

Gold stocks also saw considerable weakness on the day, dragging the NYSE Arca Gold Bugs Index down by 1.9 percent. The weakness in the sector came amid a modest decrease by the price of the precious metal.

Natural gas and oil service stocks also showed notable moves to the downside, while some strength emerged among commercial real estate and software stocks.

Commodity, Currency Markets

Crude oil futures are jumping $1.63 to $65.63 a barrel after rising $0.24 to $64.00 a barrel last Thursday. Meanwhile, after slipping $0.80 to $1,276 an ounce in the previous session, gold futures are climbing $3.30 to $1,279.30 an ounce.

On the currency front, the U.S. dollar is unchanged compared to the 111.92 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1254 compared to last Thursday’s $1.1245.

Asia

Asian markets failed to hold early gains and ended mixed on Monday, as investors were reluctant to pick up stocks amid a lack of positive triggers. Many of the major markets in the region were closed for Easter Monday.

Chinese stocks retreated amid speculation the government may slow down monetary easing. The benchmark Shanghai Composite Index tumbled 55.75 points or 1.7 percent to 3,215.04.

The markets in Indonesia and India also fell sharply, with Indian stocks weighed down by a weaker rupee and higher crude oil prices.

Meanwhile, Japan’s Nikkei 225 Index inched up 17.34 points or 0.1 percent to 22,217.90, supported by gains in the financial, automobile and chemical sectors.

Shares of Daiwa House Industry Co. jumped nearly 7%, Familymart surged up 5.7% and Toho ended higher by about 3.1%.

Yahoo Japan, Aeon, Seven & i Holdings, Mitsui OSK Lines, Konami Corp., Odakyu Electric and Inpex Corp. also posted notable gains.

On the other hand, Dainippon Screen Mfg. Co. shares declined more than 4%. Credit Saison, Showa Denko K.K., Furukawa Electric, Chiyoda Corp. and Sumco Corp. lost 2 to 3.4%.

Shares of Chinese oil drilling companies rose, after crude oil prices soared to a near six-month high on reports the U.S. is likely to toughen its sanctions on Iran.

According to a Washington Post report, the U.S. is likely to announce that buyers of Iranian oil will have to end their imports soon, or be subject to U.S. sanctions. China, India and South Korea are among the major buyers of Iranian oil.

Markets in Taiwan and Singapore edged up marginally, while stocks in South Korea and Malaysia ended nearly flat.

The markets in Australia, New Zealand and Hong Kong remained closed for the Easter Monday holiday.

Europe

The major European markets remain closed on the day for the Easter Monday holiday.

U.S. Economic Reports

At 10 am ET, the National Association of Realtors is scheduled to release its report on existing home sales in the month of March.

Existing home sales are expected to drop by 2.3 percent in March after soaring by 11.8 percent to an eleven-month high of 5.51 million in February.

Stocks In Focus

Shares of Halliburton (HAL) are likely to see initial strength after the oil service provider reported strong first quarter results on a jump in demand from international customers.

Consumer products company Kimberly-Clark (KMB) may also move to the upside after reporting first quarter results that exceeded analyst estimates on both the top and bottom lines.

On the other hand, shares of Intuitive Surgical (ISRG) are moving sharply lower in pre-market trading after the robotic surgical systems maker reported weaker than expected first quarter earnings.
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